Thursday, November 10, 2016

Universal Income - A Reality Coming?

Technology is a recurring theme. My thoughts return periodically to how technology is changing our world and what effects it will have on us. As the workers' compensation world considers its future, there is merit in considering the broader context of the future of work itself. Certainly, there are a number of challenges for workers' compensation, but focus must also remain on the bigger picture. 

In 2015, I penned How will Attorneys (or any of us) Adapt. It raises some potential impacts of the technology revolution. How may jobs be lost as technology and robotics change the manufacture of products? Beyond this, however, are questions of how increased safety and efficiency from the technology revolution may decrease the need for a vast variety of other professionals and services. 

I personally began to think about these implications at the 2015 NCCI Annual Issues Symposium. One of the issues raised by Salim Ismail (Salim Ismail and a Life-Changing Seminar in Orlando) was income. We have all become accustomed to going to work, earning a paycheck, supporting ourselves, and saving for retirement. Working has become a part of what humans are (at any social introduction a usual question is "what do you do"). The paradigm has shifted over time, from agriculture to manufacturing to service, but the life element of work has remained. 

Salim Ismail raised the issue of Switzerland's debate about government income support. That discussion centered on the government providing income payments to its citizens, a "universal income." Ismail raised the issue as a possible effect of technology. How, he questioned, will people support themselves if the age of technology has the predicted effects, diminishing or even eliminating the working world as we know it?

The subject was again raised by another technologist recently. In an article on Gizmodo (citing comments to CNBC) "Spacentrepreneur Elon Musk" discussed the impacts of technology and automation. His conclusion, "we’ll eventually need a basic universal income because of automation.” That is, he believes that there will be either no work or insufficient work to employ the world's population, and governments will have to distribute income (to allow us all to consume the products produced by the autobots). 

At the end of the analysis, people will have to have mediums of exchange and value, even if they no longer work. We will still have to obtain from each other the goods and services which we cannot produce ourselves. Even if legal advice is dispensed by an artificial intelligence autobot, that legal advice will not come free. Even if the truck delivering goods to our neighborhood store is driver-less, the entity that owns the truck will still be compensated for that delivery. While the specifics of various costs of bringing goods and services to market for us may change, costs nonetheless will remain. 

So, while Mr. Musk sees a future in which humans have significant free time, time to do "more interesting things," there will have to remain mediums of exchange. He contends that this will remain currency and for people to engage in the exchange of goods, the only solution is "universal basic income." That is, government will have to provide payments to vast populations of people, in exchange for nothing, but simply because they exist. This is an interesting concept and worthy of some examination. 

It is important as a foundation to consider that governments may not have any money. Certainly, governments print or mint money, and regulate it. But they may lack funds in the sense of possessing value or wealth. There are a variety of governmental forms in the world. For the purpose of this analysis, I limit discussion to two. 

In a capitalist or market system, the means of production are privately held. Each business works towards its own goals, in a competitive marketplace of products and ideas. There is a competition for consumers. Through various economic, intellectual and emotional variables, we will each decide which producer (and retailer) to patronize. We all make decisions about which supermarket to visit, which television to purchase, etc. 

Communism is an alternate form, also referred to as a "command system." In communism, the means of production, distribution, and the input resources belong to the government. Communism seeks to eliminate classes within society, ultimately leveling the field. The effects of communism have historically been seen in various sub-forms around the globe. In a communist form, the government could obtain wealth (cash) because its state-owned industries produce, distribute and retail goods and services that present value to consumers. Those consumers spend their resources (cash) to purchase, thus placing resources in the hands of the government. 

In the capitalist form, those resources (cash) pass instead to the private business owner. For example, the owner of a retail facility, who in turn pays the manufacturer, the processors, transporters, etc., of the offered product. In a capitalist system, government obtains its resources through taxation rather than ownership. Each time funds change hands in this path to the consumer there is a government confiscation of some percentage, which escheats to the government, taxes. 

This will perhaps make more sense with a micro example. A landowner elects to grow crops on her land. She hires people to plant seeds, cultivate, weed, and harvest the crop. A truck owner sends a vehicle (and driver) to the farm to retrieve the crop. It is transported to a building owned by another, where employees are paid to process that crop (cleaning, grading, cooking, canning, freezing, etc.). Another truck owner sends a truck and driver which transports that processed product from that facility to a warehouse. There, employees sort and organize many such products, store them, and eventually place them on yet another truck, whose driver takes them to a retailer. Employees at the retailer place those goods on shelves, display them, advertise/promote them, and we individually are convinced to consume them. 

Each human being in these exchanges brings something to the equation. They have skills and abilities to grow crops, operate specialized equipment, organize, manage, display, or otherwise bring value to some segment of the parade that leads from dirt to supermarket. And, each is compensated for their contribution and skill. Each then uses that compensation to consume other goods and services elsewhere in the economy, thus similarly rewarding others for their respective skills and abilities. Through the process of economic exchange, we each employ skills and abilities, deliver value, receive compensation, and in turn consume the products and services of others. 

In a communist system, all of these factors are government owned and controlled. In the capitalist system, each are owned by individuals or companies. It is this ownership or taxation that finances government management and services. Services such as police protection, street maintenance, and more are supported by these taxes or other revenue. 

Musk envisions a world in which there will be no human farm hands, truck drivers (or truck assemblers for that matter), warehouse workers, or store employees. He envisions a world in which those tasks are all completed by the autobots, and this will "eliminate millions of jobs over the coming decades," giving us time to do "more interesting things." This techo-revolution is predicted to eliminate a vast spectrum of jobs that exist in the current economy. There are those who self-deny the potentials ("someone has to build the robots" or "someone will have to program the software"), but as the paradigm develops there is no reason that these tasks likewise cannot be undertaken by other robots and more sophisticated artificial intelligence. 


Musk contends that we will therefore "end up with a universal basic income, or something like that.” He contends that such a system "would be incredible." He contends that it is possible that "everyone would receive enough resources to be able to survive without working," and that this will "solve the problem of homelessness and poverty and also pivot our cultural and economic identity." It is not the first time that humans have heard the promise of plenty for all, and "from each according to his abilities, to each according to his needs." But, Musk's vision requires no abilities whatsoever, perhaps a new twist on the promise?

Where would the government obtain the money from which to make these payments of "universal basic income?" Back to the foundation premise, no entity or government has inherent value or money. Value has to be created through some process or effort. Government can distribute value (or some representation of value, such as paper money or specie) only if government first acquires value, either through ownership of industry (in its broadest sense, communism) or through taxation of industry and individual effort. 

According to the Huffington Post, the vast majority of American federal government income is derived from individual income tax and payroll taxes. Both of which are fundamentally dependent upon some person producing value and being compensated (work). In the paradigm envisioned by Musk, the Utopian "no work required" world of the future, there is no work, thus no "income" and no payroll or income to tax. So, to support the Utopian future envisioned by Musk, fundamental changes in government would necessarily be required. 

Ultimately, government would be forced to replace its current employee/individual-based stream of income with some other income generating paradigm. There are about 200 million people in this country that are "working age" according to the Federal Reserve Bank of St. Louis. According to the ultimate font of knowledge, Wikipedia, income statistics in the United States currently demonstrates different predicted rewards for various groups of people and skills. For example, people with doctorate degrees tend to receive greater recompense than those with bachelors degrees, who nonetheless tend to receive more than those with high school diplomas. 

Would a "universal" income program compensate each and everyone equally? If so, would there remain any real value in education or skills? If not, would there remain any purpose or value in obtaining education of any kind? Certainly, the argument would be that personal growth would be enhanced by education, but without the ultimate result of greater success, would humans pursue knowledge for the sake of knowledge? Would there be a need for the vast volume of universities, colleges, trade and other  schools?

The average American earns $24.57 per hour according to the MotleyFool. Based on a "normal" forty hour week, that would be $982.80 per week, and thus for a 50 week year (assuming two weeks unpaid vacation), an average annual income of $49,140. To pay this income to the 200 million working-age people in America would require $9,830,000,000,000. That is about ten trillion dollars every year. Currently, the U.S. Government budget is approaching four trillion dollars, with as much as 10-15% of that coming from the creation of debt. The tax revenue of all (local, state and federal) government in America is "guestimated" to be just over $7 trillion. From this revenue stream must come road repairs, voter registration services, code inspections, and a vast spectrum of other government services. 

Thus, for a governmental "universal income" to replace current American standards of living may be an interesting financial challenge. Government revenue collections would essentially have to at least double. And, with the demise of individual "income" and payroll to tax, the government would have to replace that revenue from other sources. In short, those who own the means of production (automated though they may be), distribution and retail would face rates of taxation that exceed those faced today. 

According to the Center on Budget and Policy Priorities, corporate tax revenues currently account for about 11% of the $3.2 trillion in U.S. government tax revenues, or about $352 billion dollars. For the corporate (business ownership) element of the economy to generate the $10 trillion needed for this "universal income," the taxation on business ownership would have to be increased by about 28 times. Plus whatever is required to continue the other government expenditures currently running about another $4 trillion (11 times the $352 billion currently collected). So, all told the increase would be about 33 times. 

Some "technofuturists" assure us that while robotics are a major part of our future, the change will gradual, evolutionary rather than revolutionary. They contend that while the robots will come, they will come at a pace that will allow us, and our governmental systems to adapt. Others, however, contend that "technology is developing on an exponential curve, meaning we are fast approaching a moment where our tech will outsmart us, or at least render us obsolete." That is simply not a comforting thought. 

Still others assure us that the advent of technology will not be the end of employment. They decry the fantasy of a pure leisure world. One person quoted by Gizmodo contends that "when mechanisms increase productivity, 'new forms of employment have to be created.'” 

In the end, this coming change may be beneficial or cataclysmic. Perhaps all economic change is both beneficial and cataclysmic simultaneously? The real analysis may not be whether an ox is being gored, but in fact whose ox it is. In other words, with the coming evolution or revolution, it may be critical to our future to know whether we each are each a buggy-whip assembler, a factory owner, a pianist, a scientist, or other. What value will we each bring to a marketplace? What technology would/could make us each obsolete?


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